Commissioner of Income Tax vs Bhagwan Cloth Stores

Tiwari, J.—The applicant (Commissioner of income tax, Bhopal) has filed these four Misc. Civil Cases, particularised as above in Set No. ''A'', u/s 256(2) of the income tax Act, 1961 (''the Act'') seeking direction to the Tribunal to state the cases and refer the common questions as extracted below, for our consideration and opinion :

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in restoring the appeals for the assessment years 1977-78, 1978-79 and 1979-80 to the file of ITAT/AAC when the matter was finally concluded after examination at various stages regarding the genuineness of the firm ?

Whether, on the facts and in the circumstances of the case, the grounds under which the Tribunal entertained the Misc. Appeals of the assessee can be termed as mistakes apparent from record for rectification u/s 254(2) ?

Whether, on the facts and in law the Tribunal is correct in passing the orders allowing the Misc. Application u/s 254(2) beyond the statutory time limit thereunder ?

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in reopening the matter for the assessment year 1976-77, when the matter was finally concluded u/s 256(1) before the High Court

Misc. Civil Case No. 139 of 1990 relates to the order passed on R.A. No. 17(Ind.) of 1989 arising out of the order passed in M. A. No. 1 (Ind.) of 1987 connectible with IT Appeal No. 66 (Ind.) 1982 for assessment year 1976- 77 decided on 10-2-1989. Misc. Civil Case Nos. 102,103 and 104 of 1990 are filed after rejection of the applications registered as R.A. Nos. 18, 19 and 20 (Ind.) of 1989 arising out of the orders passed in M.A. Nos. 3, 2 and 2-A (Ind.) of 1987 connectible with IT Appeal Nos. 923, 1561 and 1562 (Ind.) of 1982 for assessment years 1977-78, 1978-79 and 1979-80 decided on 10-2-1989.

Briefly stated, the facts of the cases are that the assessee is a firm brought into existence by a partnership deed dated 31-3-1975 effective from 14-11-1974. The business was carried on by the HUF till 26-10-1973. The ITO found that no partition was effected in the family before the constitution of the firm. The ITO felt dis-satisfied that there was no genuine firm. The assessee filed the appeals before the AAC which were dismissed. The assessee then filed appeals before the Tribunal which were also dismissed. Against these orders, the assessee again filed applications u/s 254(2) of the Act before the Tribunal. The applications were allowed. Against the orders passed on these applications the applicant filed applications u/s 256(1) which were rejected the applicant has then filed these applications u/s 256(2)

Likewise the applicant (Commissioner of income tax, Bhopal) has filed remaining four Misc. Civil Cases, particularised as above in set No. ''B'' u/s 256(2) proposing two common questions, as extracted below, for our consideration and opinion :

Whether, on the facts and in the circumstances of the case, the ITAT was justified in confirming the order of the Dy. Commissioner (Appeals) when the said order was as a result of allowing of Misc. Application u/s 254(2) by the ITAT beyond the statutory time limit ?

Whether, on the facts and in the circumstances of the case, the ITAT was justified in holding that the Dy. Commissioner (Appeals) carried out the orders of the Bench in its order dated 10-2-1989 when the said order was clearly out of time in terms of section 254(2) ?

Facts in brief concerning these four cases under Set No. ''B'' are that Dy. Commissioner (Appeals) following the order of the Tribunal passed in M.A. No. 1 (Ind.) of 1987 for assessment year 1976-77; M.A. No. 3 (Ind.) of 1987 for assessment year 1977-78; M.A. No. 2 (Ind.) of 1987 for assessment year 1978-79; and M.A. No. 2A (Ind.) of 1989 for assessment year 1979-80 arising out of the orders passed in IT Appeal Nos. 66 (Ind.) of 1981; 923 (Ind.) of 1982; 1561 (Ind.) of 1982 and 1562 (Ind.) of 1982 set aside the orders of the Assessing Officer and restored the issue relating to the genuineness of the firm to the file of Assessing Officer. Aggrieved, the department filed appeals before the Tribunal contending that Dy. Com missioner (Appeals) has committed error and that the orders passed u/s 254(2) of the Act were unsustainable as being barred by limitation. It was thus contended that consequential orders were erroneous in law. The Tribunal, however, dismissed the appeals registered as IT Appeal Nos. 584 to 587 (Ind.) of 1989. The applicant then filed applications u/s 256(1) which were registered as R.A. Nos. 432 to 435 (Ind.) of 1991. These applications were rejected on 16-3-1992. Thereafter the applicant has filed these four Misc. Civil Cases u/s 256(2).

Misc. Civil Case Nos. 580, 581, 584 and 585 of 1992 are filed after rejection of the applications registered as R.A. Nos. 434, 435,433 and 432 (Ind.) of 1991 arising out of the orders passed in M.A. Nos. 1, 3, 2 and 2A (Ind.) of 1987 connectible with IT Appeal Nos. 586, 587, 585 and 584 (Ind.) of 1989 for assessment years 1978-79, 1979-80, 1977-78 and 1976-77 decided on 9-9-1991.

We have heard Shri D.D. Vyas, the learned counsel for the applicant/ department and Shri P.M. Choudhary, the learned counsel for the non- applicant/assessee, in all these Misc. Civil Cases, as particularised under Set No. ''A'' and Set No. ''B''.

Although four questions are presented and projected in cases marked as Set No. ''A'', the counsel for the applicant restricted these four cases to only question No. 3 in its reshaped and reframed form as noted below :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding the Misc. Applications u/s 254(2) of the income tax Act, 1961 within limitation and passing the order in favour of the assessee

Similarly in cases marked by Set No. ''B'', two questions, as noted above, have been projected but the counsel for the applicant restricted the same to question No. 1 as reshaped and reformulated below :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Dy. Commissioner (Appeals) resting on the fulcrum of the order passed by the Tribunal u/s 254(2) of the income tax Act, 1961 ?

Shri Choudhary submitted that the questions do not arise out of the orders passed by the Tribunal.

We have considered the submissions. We find that the questions posed in the case denoted by Set No. ''B'' depend on the validity of the orders of the Tribunal passed in regard to case denoted by Set No. ''A''. In cases marked by Set No. ''A'', the question is whether the Misc. Applications were filed by the assessee within the statutory period of limitation and whether the Tribunal was justified in passing the orders in favour of the assessee ? In case marked by Set No. ''B'', the question-is whether the Tribunal was justified in upholding the order of Dy. Commissioner (Appeals) on the ground that he only carried out the order of the Tribunal passed in Misc. Applications on 10-2-1989 with regard to the genuineness of the firm. In other words, the case shown in Set No. ''B'' are closely linked with cases in Set No. ''A''.

As man making direction to the Tribunal, we do not deem it proper to express definite opinion on the merits of the matter but do fine that the question of invocation of section 254(2) is a question which needs to be heard and answered one way or the other at proper stage.

In the circumstances, we allow these applications in part and direct the Tribunal to state the case and refer the aforesaid reshaped and reframed questions of law with regard to four cases indicated under Set No. ''A'' and state and refer the reshaped another question, as noted above, with reference to remaining four cases indicated under Set No. ''B''. These applications are thus allowed in part in terms indicated above with no order as to costs.